6 ways to consolidate your debt

Jan 6, 2015 by

6 ways to consolidate your debt

Most consumers have good reasons for accumulating debt. Sometimes these good intentions can spiral out of control into a high debt load spread out all over the place. How great it would be if all those debts could be lumped into one easy payment each month? Well there are typically many options for any consumer to consolidate debt into a single loan and provide clarity and peace back in to your finances.

Here are few that may be available to you. Remember to consider them carefully to ensure that these options actually make financial sense:

  1. Credit Card Consolidation – If you can read this sentence then you probably qualify for 0% interest on a balance transfer with some credit institution for a year or more. This is a great option for the disciplined consumer looking to save money on interest while paying down debt. Please note this strategy requires extra diligence to ensure payments are made on time every month as penalties can be very severe.
  2. Life insurance loan – This is one of my favorite, but you to have a cash value life insurance policy to qualify for this one. Personally, this was just one of the reasons whole life insurance made since for me. You can borrow against the cash value. Since it is your cash value used as collateral you dictate the payments back into your policy.
  3. Student Loan Consolidation – If you have not taken advantage of this option I beg you to look into this one. Rates are fluid and you may have an opportunity to lower your interest rate. This has the potential of substantially reducing your monthly payment.
  4. Personal Loans – You used to have to put on a suit and strut down to your local bank for one of these. Now you just log on to your PC. There has been some competition in the sector with advent of peer to peer groups like Lending Club. However, an easy application does not mean easy approval. You are still going to need strong credit and verifiable income. Gone are the days of the “no documentation loan”.
  5. Home Equity Loans – Okay, I hear you laughing. However, home values are on the rise and if you have been in your home for 10 years or more chances are this could be an option for you. This is a convenient way to access cash to pay off higher-interest debt. Be careful to ensure you can indeed make the payments as you now risk losing your home if you do not.
  6. Retirement plan loans – Some retirement plans allow you to borrow funds for a specific period of time. You will be charged a competitive interest rate which goes to yourself by the way. The draw back here is if you do not pay it back, Uncle Sam will hit with a tax bill that will make Bill Gates tremble.

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